Bristol-Myers Spin-out ConvaTec Said to Mull Sale and IPO

July 1 (Bloomberg) -- Another health-care tax-inversion
candidate could hit the block later this year.

The private-equity owners of ConvaTec, a medical-supplies
company that was once a unit of Bristol-Myers Squibb Co., have
been approached by investment bankers and potential buyers to
discuss a sale that could value the company at $8 billion to $9
billion, people familiar with the matter said.

Avista Capital Partners and Nordic Capital won’t start a
formal sale-process until later this year at the earliest, and
are also considering an initial public offering for the
Luxembourg-domiciled company, the people said, asking not to be
identified discussing private information.

ConvaTec would offer an American acquirer the ability to
shift its legal domicile out of the U.S., where the 35 percent
corporate income tax rate is the highest in the developed world.
Such transactions, known as “inversions,” are sweeping the
U.S. healthcare industry. Medtronic Inc. agreed last month to
buy Covidien Plc for $42.9 billion and take its Irish tax
address, and giants including Pfizer Inc. and Walgreen Co. are
contemplating moves.

While ConvaTec is willing to wait until next year to sell
or start a stock offering, the two owners have made it clear to
advisers that they would sell at the right price sooner, one of
the people said.

One potential buyer is 3M Co., one of the people said,
though 3M is probably too large a buyer to use ConvaTec to
change its tax domicile. Such deals typically require the
foreign company’s shareholders to end up with at least 20
percent of the stock of the combined firm.

Increasing Inversions

A message left with ConvaTec’s media line wasn’t
immediately returned, while Amanda Heravi, Avista’s head of
investor relations, declined to comment. A Nordic Capital
spokeswoman also declined to comment.

Pfizer Inc. offered to acquire AstraZeneca Plc for $117
billion, in part to take advantage of the target’s lower tax
base. The approach has so far been rebuffed. AbbVie Inc. is
seeking to acquire Shire Plc for $46.5 billion for some of the
same reasons.

Takeovers of health-care products companies have more than
doubled in value this year to $74 billion, data compiled by
Bloomberg show. After Medtronic’s purchase of Covidien, the
largest such deal was Zimmer Holdings Inc.’s $13.4 billion
purchase of Biomet Inc. from a group of private-equity
investors.

If Avista and Nordic find a buyer for ConvaTec, it would
end almost seven years of ownership. The company, which makes
surgery devices like colostomy pouches and bandages, was spun
out from Bristol-Myers Squibb in 2008 and sold to its current
owners for $4.1 billion.

ConvaTec’s earnings before interest, taxes, depreciation
and amortization may exceed $600 million this year, one of the
people said. Last year, adjusted Ebitda reached $549.7 million,
according to company financial statements. Excluding adjustments
such as the impact of foreign exchange losses, Ebitda was $502.5
million.